Hoping to pay less for petrol, diesel? Too bad, Maharashtra government won’t reduce taxes

A VAT of 26% is levied in Mumbai, Thane and Navi Mumbai and 25% in the rest of Maharashtra, in addition to a surcharge of Rs11 a liter, making petrol the costliest in the country

Though under pressure to reduce the prices of petrol and diesel, the state government has refused to bring them under Goods and Services Tax (GST) or reduce the taxes and surcharge levied on them, which is highest in the country.

Finance minister Sudhir Mungantiwar said the government could not think of lowering taxes as the state exchequer was not in position to bear such a loss.(HT File)

The state said such a move would paralyse its finances. Taxes and surcharge on petroleum products in the state account for about one tenth of its total revenue.

Finance minister Sudhir Mungantiwar said the government could not think of lowering taxes as the state exchequer was not in position to bear such a loss.

Amid the uproar over the rocketing prices of petrol and diesel, petroleum minister Dharmendra Pradhan suggested that such products be brought under GST — a move supported by Union finance minister Arun Jaitley. With a maximum slab of 28% GST, the prices of the petrol and diesel may range between Rs45 and Rs40 a litre if brought under the new tax.

Maharashtra and a few other states, however, have opposed this idea as such products are a major source of income.

“It is not possible to bring petrol and diesel under GST immediately as it will paralyse state finances. Such a move should be done at the right time. Once states are self-sustaining, the Centre can think of incorporating the oil products in the new regime,” said state finance minister Sudhir Mungantiwar.

A VAT of 26% is levied in Mumbai, Thane and Navi Mumbai and 25% in the rest of Maharashtra, in addition to a surcharge of Rs11 a liter, making petrol the costliest in the country. A surcharge of Rs2 was levied in 2015 to recover the spending on drought, while two back-to-back hikes of Rs2 and Rs5 in April and May this year were introduced to make up the loss out of falling crude oil prices in international market. When the prices fell, the revenue through VAT also fell, leading the state to incur losses. Since it could not increase the surcharge on diesel owing to possibility of losing business to the neighbouring states, it hiked the surcharge on petrol.

Opposition parties raised their voice against the surcharge.